Making low ball offers

Making a low-ball offer
Making a low-ball offer

First off, defining what a “low ball” offer is not as clear-cut as it should seem.  How low is too low?  It’s really a matter of perception to the seller, that’s the only party that should be insulted by a low offer.  A listing agent should never be insulted by a low ball.  They may be embarrassed if they truly mis-priced a home, but being insulted would be unprofessional.  It’s business, it’s not personal.  It’s tough to even put a percentage definition on what a low ball would be considered.  I’ve read that anything below 10% of list price should be considered a low ball.  That may be true for a $400,ooo house in Rocky River, Ohio, but what if you’re talking about a $40,000 bank owned listing in Cleveland?  Is a $36,000 offer on a $40,000 listing really a low ball?  I wouldn’t think so.  What defines a low ball really needs to be taken on a case by case basis and what market conditions will bear.

When a buyer is ready to make an offer on a home, many times they’ll lean on friends and family members for advice.  It’s never a bad idea to get opinions from people you trust, but keep in mind most people only buy and sell a house a few times in their life.  Some people will advise you just to throw out a low offer and see what happens, you can always go up.  That actually may or may not be the case, because you may never get the chance to make a counter offer.  Many times this is the worst advice you can take if you truly want the house.  You need to look at several aspects in order to determine whether a low offer is your best strategy.

Tips for making a low ball offer

  • Always make sure your pre-approved for the full list price of the property you’re interested in.  Otherwise the seller will just assume you’re low balling because that’s all you can afford to do.  That’s not a strong argument.
  • Make sure you can justify your offer with facts.  Comparable sales will be your best ammunition.  If a house is simply overpriced, prove it to them.  Low balling just for the sake of low balling usually doesn’t go very far unless you can back it up.
  • There are three questions that you can ask to determine whether a house has the ingredients to be a good low ball candidate.  First, is the house vacant?  If it is, most likely the current owners are making two house payments.  Second, has the home been on the market for a while?  If it’s a new listing, it’s very unlikely that a seller will bite on your offer.  If it’s been sitting for a while, they may be feeling the pain.  And third, does the owner have equity?  If you have an owner with equity, they may have some room to negotiate.
  • Make your offer clean with as few contingencies as possible.  You still need to protect yourself, but if you ask for the world, you’re probably going to get nothing.  On a low ball, price needs to be your focus.
  • Try to find out what the seller’s motivation is.  Your buyer’s agent may be able to get some insight from the listing agent.  If there are things other than price that you can accommodate, do it.  A good example would be a quick closing which is something many sellers are interested in.
  • Be prepared for rejection.  You’ll be lucky to get a counter offer if your proposal is very low.  A counter offer is usually your best case situation as you can keep negotiations going.  Many times a seller will be insulted and will shut down negotiations immediately.  If you’re bidding on a house you absolutely love and need to have, a low ball probably is your best strategy.

When a low ball offer doesn’t make sense

  • Don’t low ball because you’re only qualified to purchase up to your offer price.  If you’re not financially capable of purchasing a house in a specific price range, there’s really no good reason to look at it.  You’re really just wasting your own time trying to find a needle in a haystack.
  • Many buyers think they can low ball bank owned properties and steal them.  That’s typically not the case.  It’s rare that banks will take anything less than 10% off list.  They still have duties to their shareholders to maximize the sale price.  If you low ball a foreclosure, you’ll probably get a counter offer, but the counter will probably be at full list price.
  • It’s usually not a good idea to low ball a property that is already priced well below market value.  If you don’t lock up the property in a contract, you’re just opening the door for another buyer to snatch up the deal.

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